FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-1228
Stone & Webster, Incorporated
(Exact name of registrant as specified in its charter)
Delaware 13-5416910
(State of Incorporation) (I.R.S. Employer Identification No.)
250 West 34th Street, New York, N.Y. 10119
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code) (212) 290-7500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: 13,230,880 shares as of July 15, 1996.
Form 10-Q 2.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated financial statements required by this Item for Stone
& Webster, Incorporated and Subsidiaries are contained in Attachment A
which is filed herewith and made a part hereof.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Management's Discussion and Analysis of Financial Condition and
Results of Operations required by this Item for Stone & Webster,
Incorporated and Subsidiaries is contained in Attachment A which is
filed herewith and made a part hereof.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders of the registrant was held
on May 9, 1996.
(b) At the Annual Meeting, John P. Merrill, Jr., Bernard W.
Reznicek and Peter M. Wood were re-elected as Directors for
terms expiring in 1999. The terms of office as Directors of
Frank J. A. Cilluffo, Donna R. Fitzpatrick, Kent F. Hansen,
Elvin R. Heiberg III, David N. McCammon, J. Angus McKee, H.
Kerner Smith and Edward J. Walsh continued after the
Meeting.
(c) At the Annual Meeting, the Shareholders also ratified
the selection of the firm of Coopers & Lybrand, L.L.P.,
independent accountants, as auditor of the registrant and
its subsidiaries for the year ending December 31, 1996.
(d) The total votes cast for, withheld or against, as well
as the number of abstentions and broker non-votes as to each
such matter were as follows:
(1) Election of Directors.
Nominee Total Votes For Total Votes Withheld
John P. Merrill,Jr. 11,988,240 285,407
Bernard W. Reznicek 11,985,171 288,476
Peter M. Wood 11,984,917 288,730
There were no broker non-votes.
(2) Selection of Independent Accountants.
Total Votes For 11,887,404
Total Votes Against 280,828
Total Abstentions 105,415
<FN>
There were no broker non-votes.
</FN>
Form 10-Q 3.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index
(4) Instruments defining the rights of security holders,
including indentures - As of June 30, 1996, registrant and its
subsidiaries had outstanding long-term debt (excluding current
portion) totaling approximately $25,095,000 principally in connection
with mortgages relating to real property for two subsidiaries' office
buildings, and in connection with capitalized lease commitments for
the acquisition of certain computer equipment. None of these
agreements are filed herewith because the amount of indebtedness
authorized under each such agreement does not exceed 10% of the total
assets of the registrant and its subsidiaries on a consolidated basis;
the registrant hereby undertakes to furnish copies of such agreements
to the Commission upon request.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the
quarter for which this report is filed.
Form 10-Q 4.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STONE & WEBSTER, INCORPORATED
By: JEREMIAH P. CRONIN
Dated: July 26, 1996 Jeremiah P. Cronin
Executive Vice President
(Duly authorized officer and
Chief Financial Officer)
DANIEL P. LEVY
Daniel P. Levy
Corporate Controller
(Principal Accounting Officer)
Form 10-Q 5.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
ATTACHMENT A
Stone & Webster, Incorporated
and Subsidiaries
Index
Page No.
Condensed Financial Statements: (Unaudited)
Consolidated Statements of Operations -
Three Months Ended June 30, 1996 and 1995
Six Months Ended June 30, 1996 and 1995 6
Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 7-8
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 9
Notes to Consolidated Financial Statements 10-12
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-16
Form 10-Q 6.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenue (Note A) $268,708 $230,687 $574,542 $453,216
Cost of revenue (Note D) 250,062 207,697 534,151 412,265
-------- -------- -------- --------
Gross Profit 18,646 22,990 40,391 40,951
Selling, general and
administrative expenses (Note D) 11,178 11,053 22,708 21,480
-------- -------- -------- --------
Operating income (Notes A and D) 7,468 11,937 17,683 19,471
Other income (deductions)
Interest income 612 1,636 1,995 3,420
Interest expense (2,193) (1,173) (4,415) (2,115)
-------- -------- -------- --------
(1,581) 463 (2,420) 1,305
Income before provision
for income taxes 5,887 12,400 15,263 20,776
Income tax provision (Note B) 2,147 4,454 5,991 8,126
-------- -------- -------- --------
Net income (Notes B and D) $ 3,740 $ 7,946 $ 9,272 $ 12,650
======== ======== ======== ========
Earnings per share (Notes D and I) $.28 $.55 $.69 $.87
==== ==== ==== ====
Dividends declared per share $.15 $.15 $.30 $.30
==== ==== ==== ====
Average number of shares outstanding 13,307,000 14,472,000 13,474,000 14,496,000
<FN>
See accompanying notes to consolidated financial statements.
</FN>
Form 10-Q 7.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
June 30, December 31,
1996 1995
Assets -------- --------
Current Assets:
Cash and cash equivalents $ 25,314 $ 68,417
U.S. Government securities, at amortized
cost, which approximates market (Note C) 7,112 54,899
Accounts receivable, principally trade 160,915 165,836
Costs and revenues recognized in
excess of billings 120,235 64,494
Deferred income taxes (Note B) 6,593 7,202
Other 2,103 3,153
-------- --------
Total Current Assets 322,272 364,001
Fixed assets 215,812 212,596
At cost, less accumulated depreciation
and amortization of $172,627
(1995-$165,120)
Prepaid pension cost (Note D) 120,554 114,194
Other assets 25,999 25,981
-------- --------
$684,637 $716,772
======== ========
See accompanying notes to consolidated financial statements.
Form 10-Q 8.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
June 30, December 31,
1996 1995
-------- --------
Liabilities and Shareholders' Equity
Current Liabilities:
Bank loans $ 18,200 $ 8,200
Current portion of long-term debt (Note G) 51,962 20,944
Accounts payable, principally trade 51,917 56,901
Dividend payable 1,988 2,078
Billings in excess of costs and
revenues recognized 52,197 66,976
Accrued liabilities 52,475 43,308
Accrued taxes 5,660 7,955
-------- --------
Total Current Liabilities 234,399 206,362
Long-term debt 25,095 74,677
Deferred income taxes (Note B) 54,500 51,262
Other liabilities 23,419 22,800
Shareholders' Equity (Notes E and F)
Preferred stock - -
Authorized, 2,000,000 shares of no par value;
none issued
Common stock 17,731 17,731
Authorized, 40,000,000 shares of $1 par value;
issued, 17,731,488 shares, including shares held
in treasury
Capital in excess of par value of common stock 50,378 50,360
Retained earnings 420,099 414,724
Cumulative translation adjustment (2,988) (3,039)
-------- --------
485,220 479,776
-------- --------
Less: Common stock in treasury, at cost 112,228 92,292
4,482,140 shares (1995-3,875,572)
Employee stock ownership and restricted
stock plans 25,768 25,813
-------- --------
137,996 118,105
-------- --------
Total Shareholders' Equity 347,224 361,671
-------- --------
$684,637 $716,772
======== ========
See accompanying notes to consolidated financial statements.
Form 10-Q 9.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
Six Months Ended June 30,
1996 1995
-------- --------
Cash Flows from Operating Activities:
Net Income $ 9,272 $ 12,650
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 8,871 9,607
Deferred income taxes 3,847 5,832
Prepaid pension cost (6,360) (7,389)
Amortization of market value of shares issued
under Restricted Stock Plan 45 71
Amortization of net cost of
Employee Stock Ownership Plan 772 778
Changes in operating assets and liabilities:
Accounts receivable 4,921 (23,727)
Costs and revenues recognized
in excess of billings (55,741) (10,208)
Accounts payable (4,984) 5,739
Billings in excess of costs
and revenues recognized (14,779) (1,434)
Accrued liabilities 7,056 (3,660)
Other 906 217
-------- --------
Net cash used by operating activities (46,174) (11,524)
-------- --------
Cash Flows from Investing Activities:
Maturities of U.S. Government securities 47,753 77,598
Purchases of U.S. Government securities - (74,426)
Purchases of fixed assets (12,087) (15,741)
-------- --------
Net cash provided (used) by investing activities 35,666 (12,569)
-------- --------
Cash Flows from Financing Activities:
Proceeds from long-term debt - 12,860
Repayments of long-term debt (18,564) (2,421)
Increase in bank loans 10,336 -
Decrease in bank loans (336) -
Payment to Employee Stock Ownership Trust - (2,462)
Payment received from Employee Stock Ownership Trust - 2,753
Purchases of common stock for treasury (19,959) (5,638)
Dividends paid (4,072) (4,371)
-------- --------
Net cash (used) provided by financing activities (32,595) 721
-------- --------
Net Decrease in Cash and Cash Equivalents (43,103) (23,372)
Cash and Cash Equivalents at Beginning of Period 68,417 55,650
-------- --------
Cash and Cash Equivalents at End of Period $ 25,314 $ 32,278
======== ========
See accompanying notes to consolidated financial statements.
Form 10-Q 10.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
(A) Revenue and operating income (loss) by business segment were the following
for the three and six months ended June 30, 1996 and 1995:
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
-------- -------- -------- --------
Revenue
Engineering, construction and
consulting services $263,712 $222,216 $564,749 $436,651
Cold storage and
related activities 4,996 5,463 9,793 10,658
Other - 3,008 - 5,907
-------- -------- -------- --------
Total revenue $268,708 $230,687 $574,542 $453,216
======== ======== ======== ========
Operating income (loss)
Engineering, construction and
consulting services $ 8,669 $ 12,643 19,954 $ 21,042
Cold storage and
related activities 1,250 2,197 2,452 4,177
Other (78) 272 (128) 224
-------- -------- -------- --------
9,841 15,112 22,278 25,443
General corporate expenses (2,373) (3,175) (4,595) (5,972)
-------- -------- -------- --------
Total operating income $ 7,468 $ 11,937 $ 17,683 $ 19,471
======== ======== ======== ========
(B) The Company had a valuation allowance of $11,604 at December 31, 1995 for
the deferred tax assets related to net operating loss carryforwards. The
valuation allowance at the end of the first quarter was $11,035. The net
change in the valuation allowance for the second quarter of 1996 was an
increase of $95, primarily due to fluctuations in exchange rates on the
foreign net operating loss carryforwards. The total valuation allowance at
June 30, 1996 is $11,130. The valuation allowance at June 30, 1996
comprises $6,584 relating to the net operating loss carryforwards of
several of the Company's foreign subsidiaries and $4,546 relating to state
net operating loss carryforwards.
(C) U.S. Government securities are debt securities issued by the U.S. Treasury
comprised entirely of U.S. Treasury bills and notes, which the Company
intends to hold to maturity. These securities have maturity dates of one
year or less. The aggregate fair market value of U.S. Government securities
at June 30, 1996 and December 31, 1995 was $7,112 and $54,722,
respectively, the amortized cost basis at June 30, 1996 and December 31,
1995 was $7,112 and $54,899, respectively, and the net unrealized holding
loss at December 31, 1995 was $177. There was no net unrealized holding
gain or loss at June 30, 1996.
Form 10-Q 11.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
(D) Pension related items, which reduced operating costs, were $2,949 and
$5,944 for the three and six month periods of 1996 compared to $3,553 and
$7,108 for the prior year. These items increased net income by $1,803, or
$.14 per share, and $3,635, or $.27 per share, for the three and six month
periods of 1996 and by $2,173, or $.14 per share, and $4,347, or $.29 per
share for the prior year.
(E) During the six months ended June 30, 1996, nonqualified options for 15,000
shares of Common Stock were awarded to non-employee directors under the
1995 Stock Option Plan at exercise prices ranging from $32.75 to $34.25,
nonexercisable for six months. Nonqualified options for 100,000 shares of
Common Stock were awarded under the plan to a newly hired President and
Chief Executive Officer at an exercise price of $34.875, and are
exercisable immediately. Nonqualified options for 236,500 shares were
issued to employees at prices ranging from $32.875 to $34.25, of which 25%
becomes exercisable on the first anniversary of the date of grant and an
additional 25% becomes exercisable on the second, third and fourth
anniversaries of the date of grant. During the six months ended June 30,
1996, options with respect to 5,000 shares terminated unexercised.
A summary of stock option transactions follows:
=====================================================
1996
-----------------------------------------------------
Outstanding January 1 135,500
Options granted 351,500
Options canceled (5,000)
Options exercised -
-----------------------------------------------------
Outstanding at June 30 482,000
=====================================================
At June 30, 1996, options for 118,000 shares were exercisable and 268,000
shares were available for grant. Per share option prices ranged from $30.25
to $36.50.
Under the 1995 Stock Plan, non-employee directors of the Company will
receive grants of Common Stock in payment of their annual retainer and may
elect to receive director meeting fees in Common Stock. The total number of
shares to be issued under the Stock Plan may not exceed 100,000 shares.
During the six months ended June 30, 1996, 915 shares were issued to
non-employee directors. At June 30, 1996, 96,833 shares were available for
grant.
(F) In July 1995, the Board of Directors of the Company authorized an increase
in the share repurchase program from 1 million to 2.5 million shares of
Common Stock in open market transactions at prevailing prices. The Company
acquired 607,483 shares in the six months ended June 30, 1996, bringing
total purchases to 1,725,250 shares under this program. As of June 30 1996,
the Company had 13,249,348 shares outstanding. The amount and timing of
stock repurchases will depend upon market conditions, share price, as well
as other factors. The Company reserves the right to discontinue the
repurchase program at any time.
Form 10-Q 12.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
(G) Construction debt in the amount of $48,750, incurred by the Auburn VPS
Partnership in which the Company holds a majority interest, was
reclassified from a long-term to a current liability during the first
quarter of 1996. The Auburn VPS Partnership was unable to meet the interest
payments due on March 29, 1996 and subsequent due dates. Interest accrued
totaled $2,064 at June 30, 1996. The terms of the debt include acceleration
provisions which, at the option of the lenders, could now be exercised to
make the loan currently due and payable. The debt is collateralized by the
wastepaper recycling plant owned by the Auburn VPS Partnership. The
construction lenders do not have recourse to the assets of the Company or
its subsidiaries in the event of a default by the Auburn VPS Partnership.
(H) Although the Company continues to have possible liabilities related to
environmental pollution and other legal actions, management believes, on
the basis of its assessment of these matters, including consultation with
counsel, that none of these pending legal actions nor such possible
liabilities will result in payment of amounts, if any, that would have a
material adverse effect on the consolidated financial statements.
(I) Earnings per share are based on the weighted average number of common and
common equivalent shares (stock options) outstanding during the period.
(J) During the quarter, substantially all of the Company's subsidiaries outside
the United States and Canada have changed their fiscal year-end from
November 30 to December 31. The consolidated financial statements for the
three and six month periods ended June 30, 1996 include the operations of
these subsidiaries for four and seven months, respectively. This change did
not have a material effect on the consolidated financial statements.
(K) These statements are unaudited, and in the opinion of management, include
all adjustments, consisting of normal recurring adjustments necessary for a
fair statement of the results for the interim periods. The year-end balance
sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles. Reference is made to the Consolidated Financial Statements
included in the Company's Annual Report to Shareholders.
Interim results of operations are not necessarily indicative of the results
for a full year.
Form 10-Q 13.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts, except per share amounts, are in thousands)
Results of Operations
For the second quarter ended June 30, 1996, Stone & Webster, Incorporated
reported net income of $3,740, or $.28 per share compared to net income of
$7,946, or $.55 per share, for the same period in 1995. Operating income was
$7,468, a decrease of $4,469 from the second quarter of 1995. Revenue increased
by $38,021 or 16 percent.
Net income for the first six months of 1996 was $9,272, or $.69 per share
compared to $12,650, or $.87 per share, for the same period in 1995. Operating
income was $17,683, a decrease of $1,788 from the first six months of 1995.
Components of earnings per share for the three and six month periods ended June
30, 1996 and 1995 were:
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----- ----- ----- -----
Operations(excl. VPS Partnership) $0.34 $0.41 $0.81 $0.58
Auburn VPS Partnership (0.20) - (0.39) -
Pension related items 0.14 0.14 0.27 0.29
----- ----- ----- -----
Earnings per share $0.28 $0.55 $0.69 $0.87
===== ===== ===== =====
ENGINEERING, CONSTRUCTION AND CONSULTING
The Company's Engineering, Construction and Consulting segment reported
operating income of $8,669 for the second quarter of 1996 compared to $12,643
for the same period last year. Second quarter revenue was $263,712, an increase
of 19 percent from $222,216 for the same period a year ago. The increase in
revenue is due to continued higher revenue in the process and industrial
business units. The higher revenue in both of these business units is directly
related to the focused marketing initiatives and the increase in backlog
achieved in 1995. Operating margins in this segment of 3.3 percent were below
the 5.7 percent level experienced in the second quarter of 1995 largely due to
operating losses of $2,855 incurred by the Auburn VPS Partnership and to slower
than expected mobilization for several new projects in the process and
government business units.
For the six month period, the engineering, construction and consulting segment
reported operating income of $19,954 compared to $21,042 for the same period
last year. Revenue was $564,749, an increase of 29 percent from $436,651 for the
same period a year ago. Auburn VPS Partnership operating losses included in
first half 1996 operating income were $5,600; the Partnership's facility was
under construction and had no effect on income during the first half of 1995.
Several significant new contracts were awarded in the second quarter of 1996,
including an award by the U.S. Army Corps of Engineers to support military site
environmental restoration, valued at approximately $300,000. In addition, the
Company won a $195,000 award to perform modifications and maintenance at several
domestic nuclear power plants and a $38,000 award from Novacor Chemicals for a
process license and engineering services for an ethylene plant.
Form 10-Q 14.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts, except per share amounts, are in thousands)
Results of Operations (continued)
Orders and backlog for the three and six month periods ended June 30, 1996 and
1995 were:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
1996 1995 %Incr. 1996 1995 %Incr.
---------- ---------- ------ ---------- ---------- -----
Beginning backlog $2,331,200 $1,546,200 - $1,917,000 $1,541,800 -
Orders 731,700 340,800 115% 1,447,000 559,700 159%
Revenue (263,700) (222,200) 19% (564,800) (436,700) 29%
---------- ---------- ---- ---------- ---------- ----
Ending backlog $2,799,200 $1,664,800 68% $2,799,200 $1,664,800 68%
========== ========== ==== ========== ========== ====
Orders are the total of new orders, scope changes and cancellations.
As reported in the first quarter of 1996, the Auburn VPS Partnership, a limited
partnership in which the Company owns a 94.3% interest, experienced reduced
revenue and cash flow due to the deterioration in market price and demand for
de-inked pulp. As a result, the partnership has been unable to meet its
construction loan debt service requirements at the end of March and during the
second quarter of 1996. The construction loan, made without recourse to the
partners, has a current balance of $48,750 and is collateralized by the plant.
During the second quarter, the partnership was engaged in discussions with its
lenders on financial restructuring alternatives. To date, these negotiations
have not resulted in a debt restructuring. If a financial restructuring cannot
be accomplished, the Company's loss, in the event of foreclosure, could further
reduce net income by approximately $.15 to $.20 per share, primarily
representing a write off, net of tax effect, of the Company's remaining
investment in the partnership.
COLD STORAGE AND RELATED ACTIVITIES
The Cold Storage segment reported operating income of $1,250 and $2,452 for the
second quarter and six months of 1996, respectively, compared to $2,197 and
$4,177 for the same periods in 1995. Revenue decreased by 9 percent in the
second quarter and 8 percent in the six month period, due to decreased shipments
of frozen poultry destined for export. Operating margins decreased as compared
to the same periods in 1995 due primarily to decreased volume. Expenses in the
second quarter have increased relative to 1995 due to costs associated with the
planned start-up of the new 3.7 million cubic foot cold storage facility
expansion at Rockmart, Georgia.
OTHER
The Other segment consisted of the Oil and Gas Production Operations and the
Real Estate Development business, both of which were divested in the fourth
quarter of 1995. General corporate expenses have been reduced by $802 and $1,377
for the second quarter and six months of 1996, respectively, as compared to 1995
due to lower legal and consulting expenses and staff reductions resulting from
an incentive retirement program, which took effect in the first quarter of 1996.
Other expenses increased in 1996 due primarily to construction loan interest
expense of $1,521 and $3,048 for the Auburn wastepaper recycling project for the
quarter and six months ended June 30, 1996, respectively. Construction loan
interest costs were capitalized in 1995 since the facility was still under
construction.
Form 10-Q 15.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts, except per share amounts, are in thousands)
Results of Operations (continued)
As discussed in the 1995 Annual Report to Shareholders, the Company has changed
the reporting of pension related items. In prior years, foreign pension plans
were not separately disclosed due to materiality considerations. The Company has
changed the presentation of pension related items to include the foreign plans.
The following table presents total pension related items and shows, separately,
the effect of net pension credit on U.S. pension plans and foreign pension
expense:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
Pension Related Items 1996 1995 1996 1995
(Income)/Expense ---- ---- ---- ----
Net pension credit on qualified U.S.
plans (1) $(3,180) $(3,695) $(6,360) $(7,389)
Foreign pension expense (2) 231 142 416 281
------- ------- ------- -------
Total pension related items $(2,949) $(3,553) $(5,944) $(7,108)
------- ------- ------- -------
After-tax total pension related items $(1,803) $(2,173) $(3,635) $(4,347)
------- ------- ------- -------
Total pension related items per share $ (0.14) $ (0.14) $ (0.27) $ (0.29)
======= ======= ======= =======
(1) SFAS No. 87 income on qualified U.S. plans
(2) SFAS No. 87 expense on qualified foreign plans
The pension credit results from a plan that is funded in excess of the projected
benefit obligation. The plan is overfunded primarily due to favorable investment
performance.
The income tax provision resulted in effective tax rates of 36 percent and 39
percent, respectively, for the second quarter and six months of 1996 and 36
percent and 39 percent, respectively, for the same periods in 1995. The
effective rates for the three months ended June 30, 1996 and 1995 were higher
than the U.S. statutory tax rate primarily due to state income taxes as well as
foreign taxes, based on gross receipts, which are applicable to certain
international projects.
Financial Condition
Cash and cash equivalents, as shown in the Consolidated Statements of Cash
Flows, decreased by $43,103 during the first six months of 1996. Net cash used
by operating activities of $46,174 reflected an increase in operating working
capital (which consists of accounts receivable and costs and revenues recognized
in excess of billings less accounts payable and billings in excess of costs and
revenues recognized) of $70,583 resulting primarily from increased business
activity and the anticipation of billing milestones on major jobs. Net cash
provided by investing activities of $35,666 reflects maturities of U.S.
Government securities offset by purchases of equipment used in the Company's
operations. Net cash used by financing activities of $32,595 reflects the
payment of dividends, repayment of long-term debt (primarily related to the
Auburn VPS Partnership)and purchases of Common Stock under the company's ongoing
share repurchase program as explained in Note F to the consolidated financial
statements.
Form 10-Q 16.
For the quarter ended June 30, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts, except per share amounts, are in thousands)
Financial Condition (continued)
The Company believes that the types of businesses in which it is engaged require
that it maintain a strong financial condition. The Company has on hand and has
access to sufficient sources of funds to meet its anticipated operating,
dividend and capital expenditure needs. Cash on hand and temporary investments
provide adequate operating liquidity. Additional liquidity is provided through
lines of credit and revolving credit facilities which total $48,344, of which
$30,144 was available at June 30, 1996.
As discussed previously, a construction loan made to the Auburn VPS Partnership
has been reclassified to current from long-term on the Consolidated Balance
Sheet.